Introduction

The Crash and Depression meant the collapse of not only the American financial system, but also the world economy at large. In the previous chapters, international dimensions featured only insofar as they affected the domestic development of American finance. It is now time to look at the relationship between American finance and international finance in a more systematic way. IPE scholars, as well as other international relations scholars and historians, have traditionally taken the period between World War I and the collapse of the world economy as a key point of reference in theorizing the making of the American century. The key claim here is that, although after World War I economic and financial international power passed from Britain to the United States, the latter failed to perform its role as guardian of liberal world order in the way that Britain had done before the war (Costigliola 1977, 1984; Burk 1992; Wilkins 1999): Because of the isolationist ethos that prevailed in the United States, the increase in American international capabilities and power resources was not accompanied by a willingness to assume the responsibilities of hegemonic leadership (Kindleberger 1973; Gilpin 1987; Nye 1990). The United States, in other words, was a reluctant “heir to empire” (Parrini 1969). In this interpretation, it was the American reluctance to shoulder its hegemonic responsibilities that allowed for the ruinous expansion of the self-regulating market, which would be at the root of the collapse of the interwar economy, the subsequent rise of economic nationalism, and the fragmentation of the world economy. This narrative provides the backdrop for the conventional IPE conceptualization of the form that U.S. international power took after World War II: Having learned its lessons and cognizant of the havoc that the disembedding tendencies of capitalist markets would wreak, the United States now shed its isolationist stance and was not only capable but also willing to assume the mantle of hegemony. That is, it committed itself to “embedding liberalism,” to providing the institutional supports and collective goods that are needed to hold together a liberal world economy.